Norwegian Air could soon run out of cash unless debt plan approved

Norwegian Air could run out of cash by mid-May unless its proposed financial rescue plan is approved by creditors and shareholders, the budget carrier warned on Monday.

If approved by bondholders, leasing companies and shareholders, the plan may help Norwegian survive the coronavirus outbreak, which has grounded 95 per cent of its fleet, leaving just seven aircraft in operation.

However, the planned debt-to-equity swap will hand majority ownership of 53.1 per cent to the company’s lessors, while bondholders would own 41.7 per cent, leaving current shareholders with just 5.2 per cent, it said.

The move would allow Norwegian to tap government guarantees of 2.7 billion kroner (€235 million), which are dependent on the company reducing its ratio of debt to equity, and which would come on top of 300 million kroner it has already received.

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It is “critical to get access to the state aid package by mid-May before the company runs out of cash”, Norwegian said in a presentation to investors.

Liabilities

Rapid growth has made Norwegian Europe’s third-largest low-cost airline and the biggest foreign carrier serving New York and other major US cities from Dublin and other hubs. However, with the expansion came debts and liabilities of close to $8 billion (€7.4 billion) by the end of 2019.

Last week the company reported that four Swedish and Danish subsidiaries had filed for bankruptcy, and that it had ended staffing contracts in Europe and the US, putting some 4,700 jobs at risk.

Norwegian’s shares opened 8 per cent lower on Monday, and are down 86 per cent year-to-date.

The company aims to gradually emerge from the Covid-19 crisis with both a short-haul and long-haul network in place, and is targeting a return to normal operations in 2022.

The plan requires backing from bondholders in each of four separate votes planned for April 30th, from shareholders in an egm scheduled for May 4th, and from leasing firms.

It maintained plans to raise up to 400 million kroner in cash from owners.

– Reuters